Gold held steady on Wednesday as a surge in risk appetite on hopes of a Sino-U.S. trade deal offset support from expectations of a pause in U.S. Federal Reserve rate hikes.

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Spot palladium, meanwhile, notched up a new record high on Wednesday at $1,330 per ounce due to tight supplies.

Spot gold was little changed at $1,285.62 by 0041 GMT.

U.S. gold futures were also steady at $1,286.70 per ounce.

The United States and China will continue trade talks in Beijing for an unscheduled third day, a member of the U.S. delegation said on Tuesday amid signs of progress on issues including purchases of U.S. farm and energy commodities and increased access to China’s markets.

Trump, in a post on Twitter on Tuesday, reiterated his recent statement that the talks with China were going well but gave no details.

An index of world stock markets rose for the third straight session on Tuesday, with investors hopeful that the United States and China would strike a deal to end their months-long trade war.

Federal Reserve Chairman Jerome Powell said last week that the central bank was not on a preset path of rate hikes and will be sensitive to the downside risks markets are pricing in.

Gold tends to gain when expectations of interest rate hikes ease because lower rates reduce the opportunity cost of holding non-yielding bullion and weigh on the dollar, in which it is priced.

Jeffrey Gundlach, chief executive of Doubleline Capital, said on Tuesday that the high-yield “junk” bond market, which has been a leading indicator of recessions, is flashing “yellow now.”

Investors, meanwhile, focused on the risk of a euro zone recession after data showed more signs of slowing in the region.

German industrial output unexpectedly fell in November for the third consecutive month, adding to signs that companies in Europe’s largest economy are shifting into a lower gear due to mounting risks from abroad.

British Prime Minister Theresa May’s government suffered a defeat in parliament on Tuesday when lawmakers who oppose leaving the European Union without a deal won a vote on creating a fresh obstacle to a no-deal Brexit.

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